Erisa Lawsuit: Fiduciary Breach Claims and How to Win

ERISA Section 502(a)(2) authorizes actions for breach of fiduciary duty under Section 409 to recover losses to the plan, and Section 502(a) is the exclusive civil enforcement mechanism for all ERISA claims. Section 502(a)(1)(B) authorizes participants and beneficiaries to sue to recover benefits due under the plan, enforce plan rights, or clarify rights to future benefits. Section 502(a)(3) authorizes appropriate equitable relief for violations of ERISA or plan terms. The available remedies differ significantly by subsection. Recovery under Section 502(a)(1)(B) is limited to benefits owed under the plan's own terms, while Section 502(a)(2) claims seek recovery to the plan rather than to the individual. Participants evaluating whether they have a viable ERISA lawsuit should seek ERISA litigation legal counsel to identify the applicable claim type, assess available remedies, and evaluate the plan documents that govern the dispute.

A plan fiduciary under ERISA is any person who exercises discretionary authority or control over plan management or plan assets, renders investment advice for compensation, or has discretionary responsibility in plan administration. ERISA imposes four core fiduciary duties: the duty of loyalty, requiring fiduciaries to act solely in the interest of participants; the duty of prudence under the prudent person standard; the duty to diversify plan investments; and the duty to follow plan documents unless inconsistent with ERISA. Breach of any of these duties creates liability under Section 409 to restore losses to the plan and disgorge any profits made through the breach. Participants who believe plan fiduciaries have violated these standards should seek fiduciary services legal counsel to evaluate the fiduciary's conduct and assess the remedies available under ERISA Section 502(a)(2) and Section 502(a)(3).

Tibble v Edison International, 575 US 523 (2015), confirmed that fiduciaries carry an ongoing duty to monitor plan investments and remove imprudent options, even those prudently selected at inception. Prohibited transactions under ERISA Section 406 bar self-dealing between the plan and parties in interest, including the plan sponsor and service providers. ERISA fiduciary breach claims arise most commonly through plan mismanagement, excessive fee selection, and prohibited transactions. Co-fiduciary liability under ERISA Section 405 extends liability to any fiduciary who knowingly participates in another's breach or fails to take remedial action after gaining knowledge of one. Parties defending or pursuing fiduciary breach ERISA litigation should seek federal employment law legal counsel to evaluate conduct against the prudent person standard and assess co-fiduciary exposure.

Under MetLife Insurance Co v Glenn, 554 US 105 (2008), conflicts of interest, including arrangements in which the administrator is also the insurer, reduce the deference courts extend to those determinations. A benefit denial ERISA lawsuit under Section 502(a)(1)(B) arises when a plan administrator denies a claim and the participant disputes that determination. Common benefit denial ERISA claims involve denial of long-term disability, pension benefits, and group health or life insurance. Participants whose benefits have been denied should seek employee benefits legal counsel to evaluate the denial, review the administrative record, and assess whether the determination is defensible under the applicable standard of review.

The exhaustion of administrative remedies doctrine requires participants to complete the plan's claims and appeals procedures before filing an ERISA lawsuit in federal court. When a benefit claim is denied, the plan must provide a written notice identifying the specific reason for denial, the plan provisions supporting the decision, and a description of the available appeal process. The administrative record compiled during claims and appeals is critically important because federal courts generally limit their review to the evidence and arguments presented during the administrative process. New evidence or legal theories raised for the first time in federal court are typically not considered. Participants preparing to appeal a benefit denial should seek employment litigation legal counsel to build the administrative record with the evidence and legal arguments necessary to support federal court review.

The standard of review applied in an ERISA benefit denial lawsuit depends on whether the plan document grants the administrator discretionary authority. When the plan contains a discretionary clause, courts review the denial under the arbitrary and capricious standard, upholding the decision unless it lacks reason or substantial evidence. When no discretionary authority is granted, courts review the decision de novo, independently examining the record without deference to the administrator. De novo review is significantly more favorable to the participant because the court weighs the evidence independently. The MetLife v Glenn conflict-of-interest doctrine reduces the deference given under arbitrary and capricious review when the administrator also bears the financial cost of the benefits it decides. Participants challenging benefit denials in federal court should seek employment counseling legal counsel to determine the applicable standard and develop a litigation strategy that maximizes the chance of de novo or reduced-deference review.

Excessive fee ERISA class actions are certified under Rule 23(b)(1) where individual adjudication would risk inconsistent judgments, or under Rule 23(b)(3) when common questions predominate. Hughes v Northwestern University, 595 US 170 (2022), reaffirmed that the duty of prudence is ongoing and that the presence of some prudent options does not shield fiduciaries from liability for imprudent ones in the same plan lineup. Plaintiffs in these ERISA claims allege that fiduciaries failed to negotiate lower fees, selected high-cost retail share classes when institutional alternatives were available, or failed to regularly benchmark fees against comparable plans. Plan sponsors and administrators facing ERISA class action litigation should seek labor and employment law legal counsel to evaluate fiduciary process documentation, assess fee benchmarking practices, and develop a litigation and settlement strategy.

The DOL's Employee Benefits Security Administration enforces ERISA through civil investigations, administrative proceedings, and civil litigation. Under ERISA Section 502(l), the DOL may assess civil monetary penalties of twenty percent of the amounts recovered through settlements or court judgments in fiduciary breach cases. DOL investigations focus on prohibited transactions under Section 406, which bars dealings between the plan and parties in interest; failure to pay benefits when due; failure to provide required disclosures; and fiduciary self-dealing. Plan sponsors and administrators who receive a DOL investigation notice or subpoena should seek FMLA and federal employment legal counsel to manage document production, evaluate prohibited transaction exposure under Section 406, and assess fiduciary liability before the investigation concludes.